When I founded DHInfrastructure in 2007, I had few aspirations of building a large consulting firm, but definitely had in mind that—whatever size we got to—our work would be global. I cut my teeth in consulting at National Economic Research Associates (NERA) in the mid-1990s. There had been a lot of recent geopolitical change in those days, as well as a lot of new thinking about how best to regulate—or not regulate—infrastructure service providers.
My bosses at NERA gave me opportunities to work on a healthy mix of litigation and regulatory proceedings in the United States, as well as the establishment of regulatory frameworks and competitive power markets in emerging economies. One boss, in particular, made the point that it’s hard to give good advice abroad if you don’t know how things work at home. That always stuck with me. It shaped the kind of business I wanted to have and the kind of people I wanted to have in it.
Seventeen years, 90+ countries, many U.S. states, and 175 projects later, we certainly aren’t large, but we are most certainly global. Nearly all of our experts are involved in both domestic and international projects and are able—for example—to scrutinize purchased gas adjustments in Maryland as readily as they recommend a new water tariff indexation mechanism for Kazakhstan.
What I enjoy most about the global nature of our practice is the opportunity for cross-pollination it affords. When I first started in consulting, many countries were looking to the U.S. for lessons on infrastructure sector reform: a principal aim being to introduce more competition. Thirty years later it is clear to me that there is plenty of learning that happens in all directions.
The U.S., on the one hand, has a history of more than 100 years of infrastructure regulation with a utility regulator in each of the fifty states. The experience to draw on is deep, broad, and diverse. Emerging economies, on the other hand, are dynamic, open to profound and meaningful change, and often more flexible than more mature economies in implementing such change. So, whereas the U.S. may be the cradle of utility regulation, emerging economies (many of whom have moved from low- to middle-income status in the past three decades) are a petri dish of practice.
The term “leapfrogging” is often bandied about with reference to the impact technological change can have in emerging markets. I have always been skeptical of faith in technology alone, believing—to distort an old movie quote—“even if you build it, they may not come”. Technology is not enough without proper policy, regulation, financing, and technical assistance.
I recognize, however, that there are now many technologies—like the mobile phone—which are more accessible than ever to small businesses and individuals. These include, for example, distributed generation, onsite water treatment, and personal electric vehicles. With U.S. grid reliability increasingly at risk, a massive gap in the funding of water and sanitation systems, and a dearth of new public transport investment, these smaller scale solutions—prevalent in many emerging markets—are of increasing relevance to the U.S. context.
The same is true for infrastructure policy and regulation, institutional design, and financing modalities. We recently contributed to a study in California which looked at the possibility of using Public Private Partnerships (PPPs) to publicly finance the transmission lines needed to bring extensive new renewable energy generation online. We drew on examples of transmission PPPs in Brazil and Peru, both middle-income countries with historically successful track records of transmission auctions.
We also increasingly see opportunities for the U.S. to learn from other countries’ practices in supporting the uptake of cleaner, more efficient energy production and use. The World Bank and other development finance institutions have long supported the adoption of cleaner heating solutions in Eastern Europe and Central Asia. The programs they fund offer excellent lessons on what works and what doesn’t when trying to nudge customers in the direction of electric heat pumps and cleaner wood burning stoves. These lessons are worth learning in light of the bottlenecks in disbursement of Inflation Reduction Act funding for such technologies.
We at DHInfrastructure are privileged to have access to these stories of cross-pollination. The purpose of this blog will be to share them with you every month. We’ll recount where we got it right, where we got it wrong, what we found innovative, what we found amusing, what we found challenging, and what we think might be good to do next. Hence the title, “Utility Work Ahead: Adventures in infrastructure regulation, finance, and policy”.
No, we won’t only focus on “utilities”, but we thought it was a good visual and a reasonable play on words. And no, you won’t only be hearing from me. Future blog entries will feature contributions from others on the team with different areas of expertise and different perspectives. I will try to keep you entertained through the first few entries, which will cover regulatory accounting, contributions in aid of construction (CIAC), and the best metrics to use when evaluating clean heating and energy efficiency investments. Others on the team will pick up the torch after that.
We welcome your readership (you can subscribe to the blog by entering your email address below), and we also welcome your feedback. If there is a topic you would like us to cover, if there’s something you think we got wrong, let us know. We’re looking forward to hearing from you and hope this blog proves useful.